Hilzoy recently wrote:
The Washington Post has a story about people who accidentally leave their kids in the car, where they die from the heat. I often say that things are worth reading, but this one is more than usually so: for the detail, the understanding, the neurological explanation for how this could happen even to loving and attentive parents, the stories of how, incomprehensibly, the parents who do this go on living. It's really, really good, and really, really tough to read. But it's worth it. …
Here's one detail from the article:
"For years, Fennell [head of a group called Kids and Cars -- ed.] has been lobbying for a law requiring back-seat sensors in new cars, sensors that would sound an alarm if a child's weight remained in the seat after the ignition is turned off. Last year, she almost succeeded. The 2008 Cameron Gulbransen Kids' Transportation Safety Act -- which requires safety improvements in power windows and in rear visibility, and protections against a child accidentally setting a car in motion -- originally had a rear seat-sensor requirement, too. It never made the final bill; sponsors withdrew it, fearing they couldn't get it past a powerful auto manufacturers' lobby."
Can you imagine being the lobbyist who went to work against that? Or the executive who decided to hire that lobbyist? How would you explain to yourself, let alone to others, that you have deliberately tried to block a measure that would prevent infants and toddlers from being cooked alive in cars? Unless adding a sensor would cause some truly horrific problem for the car, it's hard to see how you could look yourself in the mirror.
Hilzoy's post prompted this followup from Mark Kleiman:
Hilzoy offers a useful take on the baby-baked-in-the-back-of-the-car problem.
If, she asks, you were one of the corporate executives who told his lobbyists to fight the proposal to make it mandatory for to equip car seats with $40 devices to warn the driver if the engine is off and there's a baby in the carseat, or if you were one of the lobbyists who carried out those orders, and then you read the horrific details of what happens between fifteen and twenty-five times a year — mostly to parents not otherwise neglectful — how could you live with yourself?
Good question. It has two answers.
One is that the adversarial ethic of the courtroom is now widely accepted: just as a lawyer has an obligation to defend a murderer, a corporate executive is thought to have an obligation to defend corporate practices that horribly kill infants. Steven Bainbridge is within the mainstream of thinking among corporation-law professors in claiming that executives in such a situation have no right to let their personal moral beliefs interfere with their efforts to make as much money for their stockholders as possible. Defending the morally indefensible is part of their jobs.
The other answer is that, if you salary depends on not seeing a moral problem, you're very likely not to see it.
Mark sent me an alert on the post, which contains some additional interesting thoughts on the "fundamental attribution error," and asked what I made of the corporate governance question.
My initial reaction is that using the "baby-baked-in-the-back-of-the-car problem" to debate the role of ethics in the workplace is a bit like using the ticking nuclear bomb scenario to debate the morality of torture. Extreme cases may make a useful test suite for determining how far one is willing to push one's position, but they differ so much in degree from the ordinary run-of-the-mill case that they don't provide much guidance for day-to-day decision making.
To extend the torture example, my own view is that torture out to be illegal. If a terrorist knew the location of the proverbial ticking nuclear bomb, however, I would have no moral qualms about letting the government torture him to get the information and having the President pardon those who did so. This is so, of course, because my position on extreme cases like these tends to be pragmatic and consequentialist. YMMV.
Let's turn to a more typical case. General Motors operated two factories in the Township of Ypsilanti, Michigan, known as Hydra-Matic and Willow Run Assembly. Hydra-Matic employed about 9,000 persons. Willow Run employed approximately 4,500 persons.
In 1974, the state of Michigan passed a law authorizing municipalities to offer property tax abatements to industries as a supposed means of retaining and adding employment opportunities. Within days after the bill passed, General Motors formed a group of managers to work on getting tax abatements from Ypsilanti Township. As explained by John T. Lynch, a GM public relations manager who was involved, the group invited township officials to visit the plant for a presentation, a plant tour, and lunch. During the presentation, the GM managers emphasized the employment benefits to be had from the plant improvements that would be undertaken if the tax abatement was approved.
Ypsilanti Township agreed. The pattern set by GM's managers in this first round of negotiations was followed repeatedly between 1975 and 1990. During that period, GM's managers extracted 11 abatements from the township providing over $1.3 billion in tax relief.
In 1981, during negotiations over one of the tax abatements, a township trustee (i.e., a city councilman) named Wesley Prater, who later to become the town's Supervisor, expressed concern that GM make a commitment to retain employment at the plants. In response, G. W. Griffith, the plant manager at Hydra-Matic, sent the township a letter, which stated in part:
The purpose of this letter is to reassure you that it is not our intention to transfer production operations to other Hydra-Matic Division plant locations; the net affect of which would have a negative impact on the employment levels at our Ypsilanti location. In this case, as in the past, we are dedicated to retain and/or increase jobs at Ypsilanti and will maintain this dedication in the future. We intend to keep this facility a viable operation for the community and General Motors. If approved, the impact of this particular application will be to sustain approximately 1,500 jobs and there will be a favorable tax impact to the Township of approximately $2.0 million per year over a twelve year period without any increase in township services.
As with every other abatement application made by GM during the relevant period, Ypsilanti township thereupon approved the request.
In connection with a 1988 abatement application, General Motors Comptroller Hughes and Willow Run plant manager Williams likewise stated: "Upon completion of this project and favorable market demand, it will allow Willow Run to continue production and maintain continuous employment for our employees." They also reviewed employment figures with town leaders, emphasizing the stability of employment at Willow Run. In supporting GM's application, the township assessor stated: "Based on the past history in dealing with the people of General Motors they've always done what they said they would do and they've kept the jobs there and they've kept the plant operating as an operational facility."
Unfortunately for both GM and Ypsilati township, demand for the Caprice sedan being assembled at Willow Run declined. At that time, the Caprice was assembled at two plants: Willow Run and a second factory in Arlington, Texas. Caprice sales, which GM had projected would total 330,000 per year, in fact had been running at only about 275,000 a year and slipped below 100,000 in late 1991. Due to this declining demand, neither plant was operating at full capacity. In response, GM announced plans to consolidate assembly operations at one of the two plants.
In February 1992, General Motors Vice President Joseph Spielman decided to transfer automobile assembly operations from the Willow Run plant to the plant in Arlington. The Willow Run facility would close after production of 1993 models ended. Believing that GM had made a contract to keep the Willow Run plant open in return for the numerous tax abatements, the township sued. The trial court stated:
There would be a gross inequity and patent unfairness if General Motors, having lulled the people of the Ypsilanti area into giving up millions of tax dollars which they so desperately need to educate their children and provide basic governmental services, is allowed to simply decide it will desert 4500 workers and their families because it thinks it can make these same cars cheaper somewhere else.
Accordingly, the trial court found that GM had made a legally enforceable promise to continue production of the Caprice line in Willow Run as long as the company produced the Caprice.
On appeal, the appellate court reversed. If the township had wanted GM to contractually obligate itself to maintain a certain level of employment in Ypsilanti in return for tax abatements, the township should have made GM sign a contract expressly committing to do so. The court explained:
The fact that a manufacturer uses hyperbole and puffery in seeking an advantage or concession does not necessarily create a promise. For example, statements such as "We're partners" and "We look forward to growing together" were found not to constitute a promise to keep a collective bargaining agreement in force for the foreseeable future so as to create by promissory estoppel a continuing duty of the employer to honor an expired agreement. Nor did exhortations for union concessions in order to keep a foundry open constitute promises under promissory estoppel to prevent a foundry from closing. Similarly, exhortations to its employees to increase productivity and assurances that a plant would not be closed, as long as it was profitable, did not establish by promissory estoppel an obligation on a steel company to keep open a plant. Turning to the case at bar, almost all the statements the trial court cited as foundations for a promise were, instead, expressions of defendant's hopes or expectations of continued employment at Willow Run.
With the litigation at an end, GM closed the Willow Run plant and 4,000 workers lost their jobs.
If I had been in GM Vice President Joseph Spielman's shoes, would I have closed the plant?
The article Mark cites reflects not my thinking on the moral choice but on the legal norm to be applied by a court reviewing my decision.
As a Catholic, my thinking on the moral choice is informed by the wealth of learning from Catholic social thought. To keep the analysis at the level of Mere Christianity, however, I'll simply note that scripture makes clear our moral responsibility to those around us, especially the poor:
At the end of every seven-year period you shall have a relaxation of debts, which shall be observed as follows. Every creditor shall relax his claim on what he has loaned his neighbor; he must not press his neighbor, his kinsman, because a relaxation in honor of the LORD has been proclaimed. You may press a foreigner, but you shall relax the claim on you kinsman for what is yours. Nay, more! since the LORD, your God, will bless you abundantly in the land he will give you to occupy as your heritage, there should be no one of you in need. If you but heed the voice of the LORD, your God, and carefully observe all these commandments which I enjoin on you today, you will lend to many nations, and borrow from none; you will rule over many nations, and none will rule over you, since the LORD, your God, will bless you as he promised.
If one of your kinsmen in any community is in need in the land which the LORD, your God, is giving you, you shall not harden your heart nor close your hand to him in his need. Instead, you shall open your hand to him and freely lend him enough to meet his need. Be on your guard lest, entertaining the mean thought that the seventh year, the year of relaxation, is near, you grudge help to your needy kinsman and give him nothing; else he will cry to the LORD against you and you will be held guilty. When you give to him, give freely and not with ill will; for the LORD, your God, will bless you for this in all your works and undertakings. The needy will never be lacking in the land; that is why I command you to open your hand to your poor and needy kinsman in your country. (Deuteronomy 15:1-11.)
The Catholic Church refers to this obligation as the "preferential option for the poor." Its roots lie in the earliest Biblical commandments:
When you make a loan of any kind to your neighbor, you shall not enter his house to receive a pledge from him, but shall wait outside until the man to whom you are making the loan brings his pledge outside to you. If he is a poor man, you shall not sleep in the mantle he gives as a pledge, but shall return it to him at sunset that he himself may sleep in it. Then he will bless you, and it will be a good deed of yours before the LORD, your God.
You shall not defraud a poor and needy hired servant, whether he be one of your own countrymen or one of the aliens who live in your communities. You shall pay him each day's wages before sundown on the day itself, since he is poor and looks forward to them. Otherwise he will cry to the LORD against you, and you will be held guilty. . . .
You shall not violate the rights of the alien or of the orphan, nor take the clothing of a widow as a pledge. For, remember, you were once slaves in Egypt, and the LORD, your God, ransomed you from there; that is why I command you to observe this rule.
When you reap the harvest in your field and overlook a sheaf there, you shall not go back to get it; let it be for the alien, the orphan or the widow, that the LORD, your God, may bless you in all your undertakings. When you knock down the fruit of your olive trees, you shall not go over the branches a second time; let what remains be for the alien, the orphan and the widow. When you pick your grapes, you shall not go over the vineyard a second time; let what remains be for the alien, the orphan, and the widow. For remember that you were once slaves in Egypt; that is why I command you to observe this rule. (Deuteronomy 24:10-22.)
In sum, Israel was commanded to be protect those members of the community who were vulnerable to oppression or poverty: widows, orphans, debtors, strangers, and slaves. Christ commanded that we love our neighbors as ourselves. At the heart of a Christian's moral duties thus is the obligation to treat each member of the community fairly and to respect each member's human dignity.
I think it would be perfectly appropriate for a Catholic business person to take those values into the workplace and to allow them to inform his/her thinking. Our working life is the principal arena in which we work out our calling from God. Leaving our faith at home in the morning is not an option.
When applied to the hypothetical at hand, however, it's not at all clear to me what course of conduct is the correct moral choice. As Michael Novak, probably the leading modern Christian thinker on the economy, has written: "Like all other fields, business is fraught with patches of moral ambiguity, and clear lines between good and evil are difficult to draw."
Spielman, who was charged with making the plant closing decision, faced a set of tragic choices. GM could not continue losing billions of dollars a year and remain a viable business. If GM had not staunched the losses, the ripple effects on all of its stakeholders—not just shareholders—would have been enormous. Suppose GM had gone bankrupt. Think about the countless thousands of additional GM employees who would have lost their jobs, the suppliers and creditors who would have suffered, the communities that would have lost tax revenues, and so on. In that light, did Spielman really have any other choice? (Consider here the lessons of the Parable of the Talents. While Christ used this parable to make a theological point, its religious significance depended upon the illustration's secular validity. Here, the parable was effective because its hearers understood that the servants were fiduciaries of the master and that the departed master retained his ownership rights even though the stewards had been entrusted with control over the property.)
Yet while I think closing the plant can be squared with morality, I think the tragic choice here calls out for mitigation. I think it would have been perfectly appropriateand probably even morally necessaryfor GM to ameliorate the lot of those workers who would lose their jobs. Just as the ancient Israelites were to care for the needy, GM could—and should—care for those affected by its decision. If I was in Spielman's shoes, it would be wholly appropriate for me to argue to my bosses that GM should invest resources in helping workers find new jobs or relocate to Arlington. Just as the Israelite farmer was to leave some sheaves in the corner of the field, GM could – and should – have softened the blow on its workers.
Turning to the analysis in the article Mark cited, it raises the question of whether moral choices should be free from legal consequences. The article argues that the shareholder wealth maximization norm is the optimal decision-making principle by which to measure the performance of corporate directors and officers. At the same time, however, the article recognizes that departures from that norm normally will have no legal consequence. This is so, because the business judgment rule insulates most director and officer decisions from judicial review.
There is, however, a class of cases not protected by the business judgment rule; namely, cases involving managerial conflicts of interest. Suppose GM had decided not to close the Ypsilanti plant. One year later, GM is subject to a hostile takeover bid. The bidder's Schedule 14D-1 discloses an intent to close obsolete GM plants and shift production overseas. Suppose GM's board rejected the bid, citing the potential impact on workers and places like Ypsilanti.
While an honest concern for the threatened workers may have motivated the directors' decision, so too might a concern for their own positions and perquisites. Indeed, corporate managers are much more likely to suffer losses as a result of takeovers than are other nonshareholder constituencies. Accordingly, it is not at all difficult to imagine a target board using nonshareholder interests as nothing more than a negotiating device to extract side payments from the bidder. Under current law, the business judgment rule would not protect the directors' decision unless they could show that it also benefited the shareholders. The directors will be held to a standard of shareholder wealth maximization. I favor this. A rule allowing directors to take into account the interests of other stakeholders in this context is too risky. It would permit managers to play one constituency off against another, with the result that the accountability provided by current law would be lost. Hence, such a rule is less likely to transfer wealth from shareholders to nonshareholder constituencies than it is to transfer wealth from both shareholders and nonshareholders to managers.